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EXHIBIT 99.1
Media Contact: Investor Contact:
Dick Gersh Rick Nida
Richard Gersh Associates Rentrak Corporation
212-757-1101 503-284-7581 Ext. 295
FOR IMMEDIATE RELEASE:
Rentrak Calls Video Update Debt Doubtful; Announces Restatement of First
Quarter Financial Statements
Portland, Ore. (Sept. 13, 2000)--Rentrak Corporation (NASDAQ-RENT) today
announced that it will establish a reserve for the entire $4.4 million balance
on its books due it from Video Update, (OTCBB:VUPDA), a St. Paul, Minn.
retailer, and that it will restate its financial statements for the fiscal
quarter ended June 30, 2000.
Video Update Write-Off
In a filing made by Video Update with the Securities and Exchange
Commission on Sept. 11, 2000, on Form 10-K, Video Update disclosed that, on
August 15, 2000, it failed to make a principal and interest payment of
approximately $6 million to its bank. In the same filing, Video Update's
independent auditors, Deloitte & Touche LLP, issued what is known as a "going
concern" report due to substantial doubt about Video Update's ability to
continue as a going concern. Video Update also disclosed that it has a negative
stockholders' equity of $35.8 million. Video Update's stock closed yesterday at
$0.07, down 30 percent from the previous day's close.
As a result of this development, Rentrak has determined to record a reserve
in the amount of the entire $4.4 million, representing the entire amount on
Rentrak's books that is due from Video Update. The reserve will be recorded in
Rentrak's fiscal quarter ending September 30, 2000.
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"Moovies, Inc. and its predecessor, Tonight's Features, were customers of
ours for years, prior to their acquisition by Video Update," said Rentrak's
President F. Kim Cox. "Rentrak never shipped a single video cassette to Video
Update. In connection with Video Update's March 1998 acquisition of Moovies,
Video Update agreed to pay 100 percent of all of billings then owed by Moovies
to Rentrak and bear full responsibility for all billings resulting from
subsequent rentals
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and sales of the Moovies cassettes. The $4.4 million reserve pertains primarily
to transaction fees for cassettes leased by Rentrak to Moovies prior to its
acquisition by Video Update in March 1998."
"Rentrak's litigation against Video Update will continue," Cox added.
Restatement of Financial Statements
The company restated the financial statements for the first quarter for
fiscal 2000 in order to record a $1.25 million payment received from one of its
customers as deferred revenue instead of revenue. As a result of the
restatement, revenues were $29.0 million rather than $30.3 million as originally
reported and net income was $249,999 or $0.02 per diluted share rather than $1.0
million or $0.10 per diluted share as originally reported. The accompanying
financial statements reflect the restatement.
In June 2000, the company entered into an agreement with one of its
customers, modifying an existing contract. Under the terms of the agreement, the
customer agreed to pay $2.5 million to the company, of which $1.25 million
related to certain contractual obligations under the company's PPT(R) operations
(the "PPT Payment") and $1.25 million was a prepayment for services to be
provided by the company's wholly-owned distribution subsidiary, 3PF.COM, Inc.
(the "3PF Payment"). Upon receiving the $2.5 million payment in June 2000, the
company correctly recorded the 3PF Payment as long-term deferred revenue on the
company's balance sheet as of June 30, 2000, but incorrectly recorded the PPT
Payment as revenue.
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In August 2000, the customer requested a refund from the company of the
$2.5 million. Rentrak does not believe that the customer is entitled to a refund
and intends to defend that position. In light of the nature of the payment, the
company has restated its financial statements to record the PPT Payment as
deferred revenue.
Rentrak Corporation, through its PPT(R) system, is the world's largest
distributor of pre-recorded videocassettes on a revenue-sharing basis. The
company directly services retailers throughout the U.S. and Canada and, through
affiliated companies, supplies a growing number of international outlets in
Japan and the United Kingdom.
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3PF.COM, Inc. (3PF) a wholly owned subsidiary, provides fulfillment, order
processing and inventory management services for e-commerce companies and other
companies requiring just-in-time fulfillment. It operates two Midwestern hub-
based distribution centers offering late night order cut-off and 24/7
capabilities, with a total of 320,000 square feet of warehouse space. An
additional 120,000 square foot facility is scheduled to open later this year.
3PF can be accessed on the Web at http://www.3PF.COM.
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When used in this discussion, the words "anticipates," "expects," "intends" and
similar expressions are intended to identify forward-looking statements. Such
statements relate to, among other things, the revenues and results of operations
for both 3PF and PPT and are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. Factors
that could affect Rentrak's financial results include customer demand for
videocassettes subject to company guarantees and Rentrak and 3PF customers
continuing to comply with the terms of their agreements. Additional factors that
could affect Rentrak's financial results are described in Rentrak's March 31,
2000, annual report on Form 10-K, filed with the Securities and Exchange
Commission. Results of operations in any past period should not be considered
indicative of the results to be expected for future periods.
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Shareowners may obtain information regarding the participants involved in the
Company's proxy solicitation, including a description of their direct and
indirect interests, by security holdings or otherwise in the Company's Proxy
Statement filed with the Securities and Exchange Commission. Shareholders should
read the Company's Proxy Statement because it contains important information.
The Company's Proxy Statement and related documents and information is available
for free at the Commission's World Wide Web site at http://www.sec.gov. The
Company's definitive Proxy Statement will be available for free from the Company
and the participants.
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